The TRIMROT checklist is familiar to every accounting student. It stands for: Technical Competence, Resources, Independence, Money Laundering, Risk, Outgoing Auditors, and Terms of Engagement.

This mnemonic acts like a gold standard in deciding to accept new clients. 

It’s a frequently examined topic in the audit and assurance of ICAEW.  They learn it through many exams and case studies across the whole qualification. By the time they qualify, they can hold it in their sleep. They are confident that finally, they know all the answers.

But let me stop for a second and ask the question few really want to ask:

Does the real world really play according to TRIMROT factors or merely treated as formalities to pass exams?

Let’s discuss some high-profile UK audit failures with the lens of TRIMROT

FIRST TRIMROT FACTOR: Technical Competence

What we teach | The Lesson: “A firm must have relevant skill in the client’s industry before accepting any assurance engagement” 

Reality Check: Carillion and KPMG

In the auditing profession, “Technical Competence” is one of those defining tenets of the TRIMROT framework. It is something drilled into auditors; the means whereby an audit is executed that would prove to be suitably reliable. For a firm to make insightful judgments, this principle dictates that it must have deep knowledge of the client’s industry. 

The logic is easy but fundamental. The proficiency of an audit team should enable it to spot trouble. This should happen well before it develops into a full-blown crisis. 

However, the recent Carillion and Patisserie Valerie collapses underlined what might occur if this most basic yardstick is not adhered to.

KPMG audited Carillion. This was one of the leading UK construction industry firms. The auditing took place from 2014 until 2016. Indeed, several indicators were identified showing the underlying financial issues in these audits. 

Carillion had high indebtedness and reported artificially higher profits, two major areas of concern that needed attention. These signals were hardly acted upon. As a result, in 2018, Carillion went into insolvency.

It thereby entered into the list of most significant corporate failures in UK history. FRC thereafter imposed a jumbo fine of £18.6 m on KPMG. This penalty raised one profound question: Was this KPMG oversight a case of mere competency lapse? Or was it a decision to look the other way to keep a good relationship with a high-profile client?

Grant Thornton and Patisserie Valerie: A Similar Story

There is another stark reminder of the risks that come from not enough technical rigour. The Patisserie Valerie scandal was presided over by Grant Thornton. Despite this evidence of potential misstatements, there were inconsistencies in management’s financial claims. Grant Thornton neglected to carry out an effective fraud risk assessment. That failure led directly to the collapse of the popular café chain, and later Grant Thornton was fined £2.3m by the FRC.

The failure in this case reveals the vulnerability of the application of technical skill in performing deep audits.

A Wider Concern for the Industry

In both cases, technical competence in the auditing area is questioned.

Overlooking certain red flags for the sake of client relationships negates the essence of audit work. Technical competence requires more than a box-ticking exercise. Auditors must have deep professional scepticism. They need to understand all nuances and peculiarities of an industry. A commitment to transparency is also essential.

These examples illustrate why audit firms need to reassess their strategies. They must recommit themselves to “technical competence.” Without such a renewed commitment, audits may lack integrity. The public may also find them untrustworthy.